RUSSIAN FEDERATION WEEKLY SITREP 23 June 2011

MODERNISATION. On Friday Medvedev made a speech about modernisation to the St Petersburg Economic Forum. Those who believe that this program has already failed, or that the only question in Russia is the imaginary Medvedev-Putin feud/power struggle won’t be interested but it’s worth reading. Generalities for the most part, but he is the President and he was giving a strategic message. A message we are now familiar with: “Modernisation is the only way to address the many issues before us”; that progress is real but still small: “They are small fruits, but they are there.” As to state control of certain sectors: “I want to state loud and clear here that we are not building state capitalism. Yes, there was a point in our development when we increased the state’s share in the economy, but this was an unavoidable step and in many ways necessary in order to stabilise the situation after the chaos of the 1990s, and re-establish basic order. That avenue has exhausted its potential now… [he describes problems with state control: state interests always dominate, the greater possibility of corruption and poor management] … This economic model jeopardises the country’s future. It is not my choice. My choice is different. Private business and private investment should dominate in the Russian economy. The state must protect the choice and assets of those who consciously decide to risk their money and reputation. We need to give them the right to make mistakes, and opportunities for drive and development.” As to specifics he spoke of more judicial independence and, as ever, corruption. He does understand what must be done as well as how difficult it will be. But he is right – as Belarus is showing – that there is no alternative. And, I again stress that this is the “Putin program” too: there was much use of “modern” in his 2005 and 2007 Federal Assembly addresses; “it’s no longer possible to survive and be competitive without modernisation” (2010). And so on. All part of The Plan.

THE THIRD TURN. Eugene Ivanov points out a decline – but not absence – of hostile coverage about Russia in some of the Western MSM recently. Too early, of course, to draw big conclusions, but one cannot shout that the Russians are coming – the “gas weapon”, conquering Georgia, subverting Estonia etc etc – forever without some evidence that it is happening.

THE ONLY STORY. One of his aides says Medvedev will make his announcement in the autumn. I believe that there is a difference of opinion in the Duumvirate on the timing: Putin – ever cautious – wants to get the Duma elections out of the way; Medvedev wants to announce earlier. Thus “the autumn” may be the compromise. I expect Medvedev to say he will and Putin to say he won’t.

ELECTIONS. There is a wide-spread assumption that United Russia’s domination is fraudulent (although I can’t recall anyone actually having the foolishness to claim that, otherwise, some other party would dominate). Anatoly Karlin takes the effort to move past assumptions to evidence to show that the results accord with opinion polls. But, for so much Russia coverage, it’s all “decision-based evidence making”.

CORRUPTION. Yuriy Chayka, the Prosecutor General (just re-confirmed) says that more than 40,000 corruption cases were begun in 2010: “We consider it progress”. Somewhat more than a drop in the bucket I would say.

BELARUS. The EU, which is in another anti-Belarus phase, has tightened sanctions. (For a brief moment Belarus was anothervictim of the Russian “energy weapon”).There have been protests, aided by social media, against the economic situation and it is said, across the country, 450 arrests. I believe that Belarus’s avoidance of economic reality is coming to an end but I expect it will be some time yet before the full consequences hit. One of the keys to how long Lukashenka can keep his Soviet-lite economy running is energy costs and here Belarus is dependent on Russia. But Moscow, years ago, made the decision to move prices for its ex-Soviet customers up to the Western Europe level, step-by-step. And, the fact is that cheap energy prices were a drag on these countries’ ability to modernise their economies. So Russia’s 15-year cheap prices were probably not doing them any favours. Both Belarus and Ukraine are experiencing this reality today.